(Bloomberg Opinion) -- If you are a believer in free markets, you might be tempted to be pleased by some of the more positive policies of the Trump administration: lower corporate tax rates, more market-friendly judges, a greater emphasis on deregulation. Resist (the temptation, if not the administration). When it comes to ideas, the lifeblood of capitalism, the influence of President Donald Trump isn’t nearly so benign.
In fact, even without considering its policy on free trade, advocates of dynamic capitalism should be especially suspicious of the Trump presidency. Consider one of the most prominent pro-market arguments, as it is applied to some other more general contexts.
It is often suggested, by Senator Bernie Sanders among others, that the U.S. should become more like Denmark, with higher taxes, stronger social protections and tougher regulation. Maybe that would increase economic security for many Americans — but it also could make the U.S. economy less dynamic and innovative, by limiting incentives and transferring resources away from the private sector. American innovations — smartphones, medical devices, entertainment and so on — spread around the world. As a general rule, when evaluating a policy for the U.S., the focus first should be on America as a global ideas generator and distributor.
Another example: Americans pay much higher prices for prescription drugs than do most people in the rest of the world. Should the government limit or bargain down those prices? Well, lower prices would reduce the incentive of pharmaceutical companies to buy, discover and market innovations, to the detriment of patients in many countries. Whether or not you are persuaded by this argument, it is central to the case for markets in the 21st century.
OK, so how does all this relate to President Trump?
American innovation is not limited to the products and services it exports. The U.S. is also a rich source of new thinking and ideas. Good ideas are globally interdependent and central to capitalism.
And since Trump took office, America has lost much of its global standing. It is no longer considered a beacon of tolerance and democracy, and is seen as uninterested if not hostile to much of the rest of the world. A Gallup poll in early 2018 found that global confidence in U.S. leadership never has been lower, and China now stands in higher overall favor.
My anecdotal experience is consistent with this data. When I was in Nigeria last year, a cab driver in Lagos cackled to me that “Now America finally has a Nigerian president!”
The days when America was a model democracy that other countries aspired to are largely past, at least for the time being. America is now exporting the notions that corruption and intolerance are a perfectly normal part of the executive branch of government, even in the world’s No. 1 economic and military power. Furthermore, it is not obvious how much the legislative branch — Congress — will check these abuses, especially if the Republican majority remains in power.
Over time, those ideological “exports” may prove a bigger problem than any particular misguided Trump policy. Trump too, is an innovation, and various populist right and alt-right parties around the world have taken comfort and drawn inspiration from his rise. Again, focus on the same general point that has made the American capitalist system so potent: Follow the ideas.
While I am not a Trump supporter, I do find many foreigners’ criticisms of America (and, sometimes, Trump) are overstated. The U.S. economy is doing fine, ordinary Americans remain mostly tolerant, and questions about Trump are being promptly and thoroughly investigated. (Contrast the Mueller investigation with Germany’s failure to officially investigate the strong connections between former Prime Minister Gerhard Schröder and the Russian gas giant Gazprom (MCX:GAZP).)
Still, all Americans have to live with these misperceptions, however unfair or incomplete they may be. In other words, part of the job of the president of the global hegemon, namely America, is to put up with criticism and maintain a brave face nonetheless. Trump has been spectacularly bad at that. Furthermore, a lot of these perceptions do ring true, such as the notion that Trump is using the presidency to enrich himself, that he engages in petty bickering, and that he simply is not well-informed about foreign affairs.
It is a truism that ideas have consequences. Nevertheless, we neglect it at our peril.